After studying the claims by everyone here and in other sources, I would like to share some opinions on how this could be sustainable.

Genneva sells gold at a premium of say 25% with a contract for 2.5%*6 months return and promise to buy back the gold at spot price after contract ends. Which means in essence you are buying a call option for gold at a premium of 10% for a 6 month contract + giving a 6 month interest free loan on your 15% to Genneva.

In layman terms, Genneva is hoping that gold price does not rise above 10% in 6 months and using the interest from your "loan" to fund their operations, meantime you are hoping that gold will rise above 10% in 6 months and pocketing any of the returns above this 10%. This is all hunky dory until 1 side does not honor the contract or the contract is not well-written in the first place.

This is all legit business. However, due to lack of regulations and a liquid market to trade in these contracts, investors are at the mercy of the company honoring their "hibah" payments and promise to buy back the gold. Genneva must also ensure that their operating expenses are below the 10% including payments to their salesperson, marketing and operational activities.

It will only be a ponzi or scam when Genneva advertises guaranteed positive returns while not highlighting the risks. Of course, who would want to invest in a risky investment right? It will not make headlines.

So, in conclusion, the business can be real but only if you understand the risks which is not only gold price moving negatively but also the company giving fake promises.

I won't be going near this as I'd rather invest in a regulated and liquid market such as stocks, options and futures.

This post has been edited by kelvinlym: Oct 4 2012, 08:33 PM

I think one of the issue here is that the mindset of these so-called investors are wishing for high return with zero risks. There is no such thing as return without risk. It may also be due to Genneva promising the sky etc.

Therefore, if they have considered the risk of this scheme being a ponzi scheme, getting raided or just suffering losses, they should now just accept it that way.

Even putting your money in FD entails risk. A bank can go bankrupt and the government may need to print more money to rescue the bank. In turn your risk is inflation.

People, please realise there is no such thing as zero risk. BNM should make it compulsory for all investments to show in clear terms what are the possible risks an investor may encounter. Investors should understand and if the company can't provide something that clear, then investors have only themselves to blame if they invest in the company.